This past summer the team from the Cambridge Centre for Alternative Finance (CCAF) in partnership with the World Bank and the World Economic forum embarked on the most ambitious research study in the history of fintech. They wanted to gather empirical data on the impact that Covid-19 was having on the fintech world. So, they sent out a survey to thousands of fintech companies in 190 countries.
LendIt Fintech was a proud partner in the survey as we promoted this Herculean effort and helped to encourage fintech companies to participate. Between June 15th and August 18th, 2020, the joint research team received completed surveys from 1,385 unique fintech companies operating in all corners of the world. From this large dataset they were able to draw a number of conclusions on the impact Covid has had on fintech.
Today, the 125-page Global COVID-19 FinTech Market Rapid Assessment Study was released and it contains a treasure trove of data. Not surprisingly, given the movement towards digital this year, the report found that 12 out of 13 fintech verticals reported growth in the first half of the year. The exception was digital lending, that reported an 8% decline in transaction volume. On average fintech companies increased the number of transactions and dollar volume by 13% and 11% respectively.
Growth was not uniform across regions. The fastest growing region was the Middle East & North Africa (MENA) at 41%, North America was second at 21%, with Latin America third at 13%. The data also showed those countries that had more stringent lockdowns averaged 50% higher transaction growth than those countries with low stringency.
One of my favorite statistics from the survey was the 92% of firms that reported either having launched or being in the process of launching new products or services. This is one thing that fintech has done very well this year. We have adapted to the changed environment and have continued to innovate.
Of course, the report highlighted many challenges that fintechs have faced this year. 40% of firms surveyed indicated that they have either introduced or are in the process of introducing enhanced fraud or security measures as a response to the pandemic. Costs also increased as companies had to pay more for onboarding customers and data storage.
Then, of course, we have the digital lending sector. I have already mentioned the 8% overall decline in transaction volume and as expected small business lenders were below average, particularly balance sheet lenders that saw an 18% decrease in volume. On average digital lenders made a 14% downward revision to expected 2020 revenue. This number is better than I expected and certainly better than several of the large lenders in this country. The best sector was Balance Sheet Property Lending that showed a 9% increase in volume.
Here is what Bryan Zhang, the Co-Founder and Executive Director of the CCAF had to say about the report:
This study reveals a global FinTech industry that has been largely resilient in spite of COVID-19. Nonetheless, its growth must be interpreted with nuance and in the context of unevenness, and the opportunities for the industry should be juxtaposed with the challenges it faces.
While Bryan and his team were the driving force behind this project it was a group effort with major contributions from the World Bank and the World Economic Forum. Caroline Freund, the Director for Finance, Competitiveness and Innovation at the World Bank said this:
Fintech has shown its potential to close gaps in the delivery of financial services to households and firms in emerging markets and developing economies. This survey shows how the fintech industry is adapting to the pandemic and offers insights for regulators and policymakers seeking to promote innovation and reap the benefits of fintech, while managing risks to consumers, investors, financial stability, and integrity.
Matthew Blake, the Head of Financial and Monetary Systems at the World Economic Forum, said:
It’s clear COVID-19 has disrupted the global economy with lasting implications for corporates and consumers. Despite this challenging backdrop, FinTechs have proven resilient and adaptable: contributing to pandemic relief efforts, adjusting operations and offerings to serve vulnerable market segments, like micro, small and medium-sized businesses, while posting year-over-year growth across most regions.
Finally, another major supporter of this report was the UK’s Foreign, Commonwealth & Development Office. James Duddridge MP, the UK’s Minister for Africa at the FCDO said:
Covid-19 is accelerating change in how people interact with financial services, which has led to unprecedented demand from developing countries to progress their transition to secure and inclusive digital finance. Whilst it is encouraging to see the growth reported by FinTechs in the study, there are also cautionary indicators that some firms are suffering a deterioration in their financial position and are concerned over their ability to raise capital in the future. This is something that the FinTech community should be mindful of given the significant economic opportunities that FinTech presents.
A few weeks ago the CCAF and World Bank released the regulatory component to the Rapid Assessment Study that showed an increase in the pace of regulatory innovation during the pandemic.
Peter Renton is the chairman and co-founder of LendIt Fintech, the world’s first and largest digital media and events company focused on fintech. Peter has been writing about fintech since 2010 and he is the author and creator of the Fintech One-on-One Podcast, the first and longest-running fintech interview series. Peter has been interviewed by the Wall Street Journal, Bloomberg, The New York Times, CNBC, CNN, Fortune, NPR, Fox Business News, the Financial Times, and dozens of other publications.